Author: Natasha Mascarenhas

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Stanford students are short-circuiting VC firms by investing in their peers

Stanford’s success in spinning out startup founders is a well-known adage in Silicon Valley, with alumni founding companies like Google, Cisco, Cloudflare, LinkedIn, Youtube, Snapchat, Instagram, and yes, even TechCrunch. And venture capitalists routinely back more founders coming out of the Stanford business program than any other university in the country.

One group of Stanford graduate students is well-aware of their favorable odds, and think that they should be able to cash in their classmates, too — not just accredited investors and the super-wealthy.

They have put together, Stanford 2020, a new fund created entirely by Stanford classmates to invest in their fellow students’ ventures.

The idea was spurred by six students, who after a year of working with Fenwick & West law firm to find a suitable legal structure landed on creating an investment club — multiple parties can invest together as long as they have some form of shared ties.

Steph Mui, a founding member of Stanford 2020 and former venture capital associate at VC firm NEA, formed the club in defiance of the inaccessibility of angel investing, which she described as an elite Silicon Valley status symbol.

“Especially in Silicon Valley where it seems kind of a status symbol and only accredited people can do it, it feels very elite” she said. “We started thinking more about if we can actually make this something that the whole class could participate in, or at least make it more accessible to more than just like these small pockets of people that do it behind closed doors?”

Stanford 2020 club members must put up a minimum of $3,000 to join the investment club, and any eventual returns will be distributed proportionally to the investment each makes. So far, Mui tells TechCrunch that $1.5 million has been raised across 175 investors, with 50 investors willing to give $500,000 on the waitlist. In fact, the club is so “oversubscribed” that it is working to give money back.

Mui estimates that roughly 40% of the class is participating in the club. The founding members are being defined as “board members” who were recruited for passion and for diversity in background, professional interests, and past leadership experience.

The group plans to invest $50,000 to $100,000 in startups depending on round size and valuation.

Mui thinks that Stanford 2020’s competitive advantage is largely the personal relationship it has with the companies it will invest in. After all, success might be just an arms reach away. Notoriously, Cloudflare, Rent the Runway, and Thredup were all born in the same classroom after being assigned a class project, according to Cloudflare CEO Matthew Prince.

“We have such strong pre-existing relationships, we know what people are working on way before they even raise,” she said.

Anyone who has been part of a club or team before knows that loyalty runs deep, but we’ll see if that closeness is enough for a founder to dole out a stake in their company. While Stanford 2020 doesn’t take any management fee or carry, equity isn’t casual; in that vein, a famed Silicon Valley firm might be of better utility than your classmates.

Stanford 2020’s set up sounds similar to StartX, the university’s attempt at investing in its own, leafy backyard which shut down in 2019. Launched in 2013, StartX offered to invest money in exchange for equity in any startup that went through its auxiliary accelerator and has $500,000 from professional investors.

Looking at Stanford 2020’s set up, the rules are almost exactly the same. Mui tells TechCrunch that startups must fulfill two criteria in order to automatically invest: first, the co-founder must be a member of the class, and second, they must raise a round of $750,000 or more from a reputable institutional investor. They define reputable as a list of 80 investors they got guidance on from advisors in the industry.

The concept of a rule-based automatic investment strategy comes with a big red flag: what if the founder has a bad idea or is a bad person, and still meets the criteria?

“I actually literally can’t think of a single person and I’m like, that person is so bad or so immoral, that we wouldn’t invest in them,” Mui said. “That’s part of the benefit of investing only in your classmates.”

But in case a Stanford-born class does have a problematic founder, Stanford 2020 has a veto voting mechanism.

In the grand scheme of things, Stanford-born startups are in a better spot than most when it comes to securing cash. They don’t desperately need another fund to invest in them. Mui’s ambition for Stanford 2020 is that other schools can copy and paste the legal structure they took a year (and a lot of hard work) to figure out.

She says they’re already getting inbound from incoming Stanford classes, other Stanford Schools, and undergraduates. Now that it’s closed, she hopes they hear from other business schools, too .

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Lo Toney’s product manager playbook for pitch deck success

The cold email worked — you’ve landed a meeting with your dream investor. Hell, you even set aside $40,000 for a pitch deck consultant to make sure your presentation looks suave.

One thing to figure out before you pick out a Zoom background: what information actually goes into those slides?

Lo Toney, founding managing partner at Plexo Capital, has advice for founders looking to raise money: think like a product manager while crafting your pitch deck. Toney has helped shape products at Zynga, Nike and eBay, and currently serves as both a GP and an LP at Plexo Capital, which invests in funds and startups. He’s done a ton of pitching and gotten pitched himself, which is why we invited him to TechCrunch Early Stage 2020.

“The framework of product management is very similar to the same playbook used by an early-stage investor and early-stage investors in the absence of an abundance of data,” Toney said. “They’re really thinking very similar to a product manager to evaluate an opportunity.”

Crafting a solid pitch deck is critical to the success of a startup seeking venture capital. Investors, however, spend less than four minutes on average per deck, and some even tell you that you have half that much time (so either talk fast or pick your favorite slides). Even if you have the business to prove that you’re the next Stripe, if you butcher the story behind the numbers, you could lose the potential to get the capital you need.

Toney said adopting a product manager mindset helps refine what that story looks and feels like.

“The story is not your product. It’s not your company, and it’s not the entrepreneur. It’s how your customer’s world is going to be better when your product has solved their problem,” he said, quoting Rick Klau from GV.

In action, Toney broke down the framework into four key slides: problem, market, solution and, of course, team.

Problem

First up, most investors say they want to see the problem you’re trying to solve up high. Toney is no different.

“I like to see an entrepreneur describing the desired outcome first, and then what are some of those roadblocks that come along the way to that desired outcome?” he asked. Similar to a product manager, founders could illustrate the different challenges that could come to executing a solution on a specific problem.

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Edtech startups flirt with unicorn-style growth

When Quizlet became a unicorn earlier this year, CEO Matthew Glotzbach said he’d prefer to distance the company from the common nomenclature for a startup valued at or above $1 billion.

“The way Quizlet has gotten to this point is by building and growing a very responsible business,” he said. “It’s the result of the hard work of the team for a decade. We’re much more like a camel.”

It’s clear, though, that the tides might be changing. In edtech, the rich are getting richer. Last week, Mountain View-based Coursera announced it had raised a $130 million Series F round a day after The Information broke a story about Udemy reportedly raising new financing at a $3 billion valuation.

For anyone who has been following my edtech coverage in recent few months, this momentum is hardly surprising. Earlier in the pandemic, MasterClass raised $100 million, Quizlet became a unicorn and Byju’s became India’s second-most-valuable startup.

While edtech’s boom is predictable, the industry is known — to the chagrin of founders and to the benefit of long-time investors — for being conservative. Today we’ll look to understand how a boost in late-stage funding may impact the market on a broader scale.

High-flying camels

Ian Chiu, an investor at Owl Ventures, tells TechCrunch that the rise of big rounds brings a “watershed moment” to the $6 trillion education market. Owl Ventures was founded in 2014 and is one of the biggest edtech-focused firms out there, but Chiu says the recent strong capital flow shows that the sector is finally emerging as a sector other investors are noticing.

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‘Edtech is no longer optional’: Investors deep dive into the future of the market

One reason some venture capitalists and founders don’t enter edtech is because the space has a sluggish stereotype, thanks to red tape, slow sales cycles, and, in America, a fragmented customer base.

But data suggests that edtech’s reputation is not entirely earned. Byju’s is India’s second-most-valuable company. Since 2013, there have been 300 acquisitions in the space. And if you only understand success in terms of unicorns, two edtech businesses, Quizlet and ApplyBoard, were recently added to the $1 billion valuation club.

The tension between edtech’s stereotype and its potential for return, plus the surge in remote learning due to coronavirus-related shutdowns, poses an interesting challenge for the market.

In the beginning of the pandemic, TechCrunch talked to a group of edtech investors to get their knee-jerk reaction to the remote learning boom. Unsurprisingly, many commented that the heat-up of the sector will materially impact K-12 and higher education and unlock new opportunities. Others warned early-stage edtech startups about how newfound competition could hurt content, quality and effectiveness of their end product. Overall, the general message was that the boom is here, everyone is excited and waiting to see what happens next.

Fast forward a few months, mistakes and extended school closures later, edtech now has a better inkling on what the next billion-dollar business needs to get right. Today, we talked to a number of top venture capitalists to get an eagle-eye view of what rapid change, adaptation, and for lack of better phrasing, popularity does for the market.

Today you’ll hear from the following investors:

Ian Chiu, Owl Ventures

What’s the next “phase” of edtech we are entering?

We are now in a time where there is a fundamental acknowledgment that education technology will have a profound effect on the billions of worldwide learners of all ages. With the historical market challenges — of infrastructure, capital and talent — being rapidly removed, there is a major opportunity for the next generation of large-scale education companies that should better represent the enormous size of the six-trillion-dollar education market. Given the attractiveness of the sector, we are now seeing more talent entering the education space; a rapidly growing market for compelling international opportunities; and more companies at the intersection of education and other major sectors. Lastly, we believe that COVID-19 and the dramatic adoption of digital education during this time marks a profound turning point and acceleration in the market for education technology.

When do you know an edtech company can and should be venture-backed?

At Owl Ventures, we are looking to invest in visionary entrepreneurs to build transformative education companies that have the potential to achieve significant scale. More specifically, we are seeking to back companies that have achieved clear product-market fit, possess attractive business characteristics that catalyze growth while creating strategic moats and have a defined and scalable monetization strategy.

How has your appetite for edtech investment changed since March 1?

Owl Ventures has always been 100% focused on edtech since our founding in 2014 and has invested in 35+ companies in the sector. In the current environment, the market now fully recognizes the enormity of the opportunity in edtech and appreciates the value that edtech companies provide as an integral part of the broader education ecosystem. We believe that the secular growth of the edtech market is still very much in its early innings around the world and that edtech will continue to be an incredibly attractive investment sector in the years and decades ahead.

Edtech historically has had fewer IPO exits than other industries. Do you imagine that will change? Why or why not?

We believe this will change dramatically in the coming years as many edtech companies have been rapidly scaling, with an increasing number now approaching and eclipsing $100 million in revenue. As a result, the pipeline for potential IPO candidates coming from the edtech sector continues to grow larger. As one example of investor interest in a pre-IPO edtech company, Fidelity Management & Research recently invested in a Series E round of MasterClass. More broadly, based on data from HolonIQ as of 29 June 2020, there are 19 edtech Unicorns around the world who have collectively raised over $9 billion of total funding in the last decade. Byju’s, recently valued at $10.5 billion, is the largest privately held edtech company in the world. Meanwhile, the stock performance of public edtech companies like Chegg in the U.S. and TAL Education in China have meaningfully outpaced the broader indices and are now valued at $8 billion and $44 billion, respectively, drawing the attention and interest of many scaled public market investors.

How near is edtech’s consolidation phase? Will we see more companies joining forces?

Consolidation has already been happening for some time in the more mature segment of the edtech market. Companies like Frontline Education, PowerSchool and Ascend Learning have all been incredibly acquisitive over the years. Anthology is another timely example of consolidation, with three companies joining forces in the higher-ed market. In addition to more mature businesses combining, we are also seeing younger startups getting acquired by larger edtech companies like Chegg.

Jennifer Carolan and Shauntel Garvey, Reach Capital

When do you know an edtech company can and should be venture-backed?

Jennifer Carolan: Same reasons apply in edtech as in other sectors — is it scalable, technology-enabled with a large market potential.

How has your appetite for edtech investment changed since March 1?

Jennifer Carolan: We have always been an education-focused fund, but it sure is nice to see so much additional capital coming into the space and leading later-stage rounds. Truth is, we have been busier than ever before. Our pipeline has increased 50% year-over-year and we are actively investing in new companies and follow-ons.

How are you managing edtech’s spur of growth with privacy concerns?

Shauntel Garvey: We are encouraging our companies to continue to keep safety and privacy considerations at the forefront of product development. Educators and administrators will need to make quick decisions on which tools to adopt for remote learning and may be unaware of all the safety and privacy implications. Edtech companies that not only design their products with privacy and safety considerations in mind, but also make their privacy policies plain and clear will be at an advantage. We also recommend that companies work with third parties like Common Sense Media and the Future of Privacy Forum who schools often rely on to vet privacy practices.

Jan Lynn-Matern, Emerge Education

What’s the next “phase” of edtech we are entering?

Phase one was about workflow efficiency, producing big infrastructure companies like Blackboard and Ellucian. Phase two was about bringing content online, producing platforms like Udemy, Udacity, Coursera and Codecademy.

We are now entering phase three, which is about bringing teaching and learning online: pedagogy as a product.

One way to think about it is that the next wave of successful edtech companies will be schools, not tools. Being a school can be lucrative: The world’s largest education businesses are universities, together generating somewhere around $2 trillion in tuition revenues.

Tackling inefficiencies in the provision of higher skills is the next frontier.

When do you know an edtech company can and should be venture-backed?

It’s successfully tackling one of the massive growing market opportunities in education:

  1. Disrupting or supporting the growth of higher education provision, gaining a share of their tuition revenues.
  2. Consumer re-skilling — companies that enable career arbitrage at scale and can take value off the table from that.
  3. Corporate upskilling — solving access to talent at scale, through hands-on training and access to global talent.
  4. It’s highly scalable, implying that it can grow efficiently relative to customer lifetime value.
  5. High-value courses/degrees that provide genuine career outcomes (selling short courses can be just as expensive as selling full degrees).
  6. If you are offering a lifeline/new revenue stream to universities you can scale extremely fast.
  7. If you can just be a reliable source of talent at scale for big employers, you can scale infinitely.

How has your appetite for edtech investment changed since March 1?

More bullish.

How near is edtech’s consolidation phase? Will we see more companies joining forces?

Over the last five years, volatility in universities’ financial performance has reached unknown heights. We will see consolidations amongst universities. Same should happen in the infrastructure, learning software and courseware space through players like publishers, Chegg, etc.

David Eichler at TCV

What’s the next “phase” of edtech we are entering?

Edtech is no longer optional … it’s a requirement for success. Specifically, it’s no longer optional to leverage technology given the current pandemic and forced remote environment. For instance, Varsity Tutors, a TCV company, has quickly transitioned [from] part in-person, part online tutoring, to 100% online, plus they have launched a handful of group-learning sessions and “virtual summer camps” aimed at school-age children to keep them engaged while at home.

When do you know an edtech company can and should be venture-backed?

The first thing we do when evaluating any potential investment is talk to customers. It’s critical for a company to have strong market demand. Once there is evident demand, we then look for a plan to efficiently and effectively scale product and/or sales and marketing.

How has your appetite for edtech investment changed since March 1?

We have been active edtech investors for two decades, and our appetite for edtech investing continues to grow as we see the combination of acceleration of market demand, as well as the continued formation of great companies and products.

Edtech historically has had fewer IPO exits than other industries. Do you imagine that will change? Why or why not?

Going public is financial strategy choice, and while there have been many great edtech companies, it is true that many have chosen to remain private. Granted, many were once public and went private (Blackboard, Renaissance Learning, Instructure among others). Part of that is because a handful of the historical market leaders have been very focused on inorganic growth and consolidation. It is hard (and sometimes inefficient) to do that in the public markets.

That said, there are a handful of strong organic growth edtech companies getting close to the scale required to go public, and there could be quite a few edtech IPOs in the next 3-5 years.

How near is edtech’s consolidation phase? Will we see more companies joining forces?

Given the fact that there are so many ways people learn, and so many idiosyncratic needs — edtech has always been a category that’s been ripe for consolidation. We believe that will continue as companies gain market share and seek to add additional capabilities.

How are you managing edtech’s spur of growth with privacy concerns?

We have always been highly focused on great learner experiences and outcomes, and a component of ensuring those is teacher/learner privacy. We actively forward invest in security to ensure the privacy of customer information.

Jomayra Herrera, Cowboy Ventures 

What’s the next “phase” of edtech we are entering?

Edtech is such a broad market (pre-K, K-12, supplemental versus core, higher ed, continuous learning, etc.) and there are new phases within each of those categories. I’d answer this question in two ways: (1) Overall, I believe changing practices come before software, especially in education. As educators have been forced to embrace and use online learning solutions and develop new practices, this may be an opportunity to accelerate tech adoption in classrooms and transform traditional teaching practices. (2) In adult learning, in particular, I believe we are now entering a phase where we can expand “bootcamps” beyond software engineering and data analytics and where the requirement for credentials may hopefully be changing on the employer side.

When do you know an edtech company can and should be venture-backed?

Most of the highly valued companies in the sector tend to be platforms that are operating in huge markets and have more traditional software-like margins (e.g., 2U, Instructure, Coursera, Udemy, Pluralsight and Guild Education). If the company is more services than software, low-margin and doesn’t have a credible path to becoming more of a platform, it will likely have a hard time raising venture capital.

How has your appetite for edtech investment changed since March 1?

It hasn’t materially changed. We’ve always known there is a lot of opportunity in the sector and I think this time period has just accelerated the urgency in creating and adopting new solutions.

Edtech historically has had fewer IPO exits than other industries. Do you imagine that will change? Why or why not?

In the near term, it’s very possible we will have a spike in IPO candidates. There are quite a few edtech unicorns who have massive tailwinds like VIPKid, Udemy, Coursera, Duolingo, Guild Education and Quizlet . That said, large tech companies and staffing agencies have been very acquisitive in the edtech market and I believe that will still be a credible exit path for many companies.

How near is edtech’s consolidation phase? Will we see more companies joining forces?

I think we’ve already seen a lot of consolidation in the edtech market, both in K-12 and higher ed. If you review all of the bootcamps that have arisen over the last decade, many have been acquired by other players (e.g.. Trilogy Education, Hackbright, Flatiron, General Assembly, Bloc, Thinkful, Fullstack Academy, etc.). Similarly, in K-12 there is a history of smaller edtech companies being sold to Student Information System (SIS) providers that act more as platforms. I expect we will continue to see consolidation in the market, but likely at the same historical pace.

How are you managing edtech’s spur of growth with privacy concerns?

Privacy is hugely important, especially if it’s related to learners under 18 years old, so asking questions around managing privacy concerns is always part of our diligence process.

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Dumpling launches to make anyone become their own Instacart

Gig economy companies like to tout the flexibility and freedom they offer workers, but for the people finding work through companies like Instacart, Uber, DoorDash and Lyft, the economic and physical risks can outweigh the rewards.

Contractors who are now considered front-line providers of essential services for their wealthier customers in the age of social distancing brought on by the COVID-19 epidemic have struggled with lack of benefits, lost tips and wages, and a dearth of back-end support.

Dumpling, a startup in the food delivery space, was born to challenge the status quo in the gig economy by giving more ownership to the workers that power it. Dumpling connects shoppers to all the resources they need to migrate off the Instacart platform and start their own personal-shopping business.

Dumpling is launching with a focus on food delivery, as the pandemic has transformed the perk into an essential service for home-bound citizens. So far, it has enabled more than 2,000 shoppers in all 50 states to become their own personal Instacarts.

Dumpling co-founders Joel Shapiro and Nate D’Anna met in college and were looking for a way to work together. Shapiro and D’Anna ditched their corporate jobs at National Instruments and Cisco, respectively, to create Dumpling.

“[We thought] what if we actually create a company to solve their problems and not just the one percenters hanging out on the coast?” D’Anna said

Before we get into how Dumpling works, let’s discuss the obvious: Not every gig worker wants to be a business owner, which is exactly the opposite of what the startup needs to succeed. Despite the gig economy’s proliferation over the last decade, only 3% of adults said they performed gig work as a primary source of income; fewer than 1 in 10 adults were full-time gig workers, according to the Federal Reserve’s latest report.

Instead, a larger issue within the gig economy is classification of workers, leading to the rise of unions and co-ops for more shopper support. 

Dumpling is another example of what the future would look like. 

Shapiro admits that not every gig worker will need Dumpling. But instead of pitching Dumpling solely as a place for gig workers to start their own businesses, he thinks the startup can bring more money into workers’ hands.

“With multiple years of all these multi-demand apps, we know that workers are going to be exploited and screwed at some point and their pay is going to be drastically reduced,” he said. “We’re trying to make them ultimately have control so the rug can’t be pulled out underneath them.”

How it works

To start, Dumpling helps users create their own LLCs. Then it offers a slew of different products, including a Dumpling credit card to help shoppers buy groceries before customer payment, an app to help centralize deliveries and customer communication, and a forum for mentorship and worker support.

Image Credits: Joel Shapiro / Dumpling

Shoppers primarily acquire customers through marketing and self-promotion when dropping off orders for other delivery apps, according to Dumpling. Some customers have recently started going directly to Dumpling to look for shoppers to order from in the area.

Dumpling gives 100% of tips to business owners. Unlike Instacart, Dumpling allows business owners to pick what tip options show up for their customers and set a personal default tip minimum. There is also space for customers to leave reviews.

The company makes money in a few different ways. It charges shoppers a one-time $10 fee to set up, which includes a Dumpling credit card, a listing on the website and a shopper search tool. The platform then charges shoppers either a $39 monthly fee or a $5 per-transaction fee for each time they book a job. On the other end, customers pay 5% on top of orders for payment processing.

Dumpling claims it can help shoppers make three times as much money as Instacart shoppers. But let’s do the math.

While the monthly fee or $5 per-transaction fee could eat into tips, Dumpling claims that users make $33 in average earnings per order, which is three times as much as Instacart users. Instacart estimates that full-service shopper pay ranges from $7 to $10 per order, according to a NerdWallet article.

Because shoppers can set their own rates, customers could simply flock to the cheapest option of the day, thus driving competition between shoppers to keep rates low (and make less money).

There are a few reasons why Dumpling doesn’t think it’s going to be a race between shoppers.

First, Dumpling customers are largely repeat clients who crave a personalized shopper to help them out. This repeatability gives shoppers some flexibility and stability, income-wise. Shoppers can schedule weekly grocery delivery times so they can manage the orders, instead of trying to drive an Uber and maximize their time on the road.

Second, Shapiro hopes that pricing isn’t the only reason a customer goes to a shopper. He noted that reviews and ratings are big sells, as well as areas of focus like vegan, local farmers’ markets, dietary restrictions and special diets. Imagine if you’re newly joining Keto and you can get a Keto-savvy shopper to pick up ingredients for you, in other words.

In the past three months, the platform has brought in tens of thousands of reviews on shoppers. The average rating of a Dumpling shopper is 4.9 to 5 stars.

It can’t fix what is broken

Even though Dumpling wants to bring ownership to the gig economy, it is experimenting with ways to support its growing network. One way would be getting bulk discounts on health insurance and benefits. Soon, Dumpling is starting a fraud protection benefit for any shopper on its platform.

While Dumpling can’t fix the gig economy, it can drastically change the way that the people within it work and own their career. Especially those few who rely on the gig economy as their sole job.

Matthew Telles, one of Instacart’s first shoppers in Chicago, fondly remembers the grocery delivery platform’s early days. He would average 20% tips on all orders, rarely drove more than five miles for a delivery and was even invited to staff engineering calls to give feedback on the platform.

Then Amazon bought Whole Foods, a deal which Telles thinks pressured Instacart to get the biggest market reach as quickly as possible (which included saving money). He received orders from all over the state. Instacart threatened to take away tips. The engineering call invites stopped.

Five years later, Telles remains on the app to advocate for shoppers. His efforts have contributed to millions in settlement payments from Instacart. The company, which has risen to a level of prominence during the pandemic, recently turned its first profit. Its shopper network continues to complain of lack of support from the platform, and has organized multiple times for better wages, changing default tip minimums and personal protective equipment.

“Fighting Instacart is my hobby now,” Telles said. “Dumpling is now my career.”

Dumpling did not disclose profitability, but said order volume has spiked by 20x. The unprecedented growth has led Dumpling to recently announce it raised $6.5 million in Series A funding, led by Forerunner Ventures. Participating investors include Floodgate and FUEL Capital. The company’s total known venture funding to date is $10 million.

As for Telles, he loves the flexibility he can have to pick up a gratitude meal for the most consistent customers along with their groceries. He’s cut his hours in half and doubled his income by going full time on the app. And, to his delight, he’s been invited on calls with Dumpling’s co-founders themselves, similar to the early days of Instacart.

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Extension rounds help some startups play offense during COVID-19

The venture capital world is constantly changing, and its evolution can sometimes flip pieces of conventional wisdom on their heads. For example, a recent flurry of extension rounds from Silicon Valley’s hottest startups like Stripe and Robinhood seem to signal that the investment type has suddenly become cool.

Extensions evolving from unloved to hot is not the first time that a type of VC deal has gained, or lost luster. In past times, for example, raising consecutive rounds from the same lead investor was often perceived as a negative signal; why couldn’t the startup find a new, different lead investor? Today, in contrast, venture capitalists are using inside rounds to double-down on winning startups, a way of helping ensure returns for their own backers.

The recent phenomenon of extensions becoming vogue is a tale of the times, in which the best startups get to play offense, and startups that can’t show accelerating growth are left behind. Let’s explore what has changed.

A series of fortunate extensions

TechCrunch first wrote about the new extension-round trend after seeing what felt like a wave of the deals crop up. Some were large, like MariaDB’s huge $25 million add-on to its Series C, or Robinhood’s biblical $320 million addition to its Series F.

But most were smaller events like Sayari adding $2.5 million to its Series B, or CALA adding $3 million to its seed round. Even more recently, Eterneva raised another $3 million on top of its seed round, and also out this week was a million pounds more for Edinburgh-based Machine Labs’ seed round.

One reason for the growth of extension rounds in 2020 has been runway — making sure that a startup has enough. Upstarts often raise on an 18-month cadence. But because of COVID-19 and its constituent economic disruptions, many have reduced costs in a bid to bolster how long they have until their cash stores reach zero.

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8 edtech investors talk reskilling, digital universities, ISAs and other post-pandemic trends

We know that the coronavirus has brought unprecedented attention to the edtech market, but now what? What happens when schools are no longer clambering toward an overnight solution? When the surges slow? When our world reopens and there doesn’t need to be a full-suite of at-home solutions for kids and parents?

As the next wave of edtech companies are being built to address these novel use cases, investors are looking for solutions that aren’t simply pandemic-era important. To some, that means skipping the latest videoconferencing platform play and maybe cutting a check to a digital-only university. To others, it means looking for the platform that will educate a diverse range of users, especially the unemployed.

A spree of recent consolidation within the market shows that there is a need for a better plumbing system in the fragmented world of edtech.

We turned to eight investors in the space to understand which subcategories are shaping up to be the future, following up on our first survey last fall when the world was very different, and another in early April when less was understood about the pandemic. Our goal here was to find non-obvious ways innovation is living within the noisier-than-ever sector. The result? Intel on nascent trends, deal makers, and what adaption looks like amid a time of uncertainty.

Today you’ll get a deep dive on the nerdy stuff from the following investors:

  • Reach Capital’s Jennifer Carolan, Shauntel Garvey, and Chian Gong
  • Ian Chiu, Owl Ventures
  • Jan Lynn-Matern, Emerge Education
  • David Eichler, TCV
  • Rebecca Kaden, USV
  • Jomayra Herrera, Cowboy VC

Investors differed on which subcategories benefitted the most, but it’s clear that the pandemic didn’t lift up the entirety of the edtech space. One investor noted that the pandemic made them even less interested in ISAs, while other venture capitalists noted how valuable the financing instrument is now, more than ever before.

We got into some of the big themes that have risen in the past few months: online learning, re-skilling, ISAs, virtual universities, and where each investor draws their line around these categories.

A common theme throughout the commentary now is that the opportunity presented by coronavirus is not being met with complacency, but instead a push to grow better. Investors talked about innovation needs to account for childcare, cost, digital infrastructure, and the addressable population, pandemic or not.

I think that’s enough teasing. Now, onto the answers.

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Benchmark-backed Optimizely confirms it has laid off 15% of staff

Optimizely, a San Francisco-based startup that popularized the concept of A/B testing, has laid off 15% of its staff, the company confirmed in a statement to TechCrunch. The layoff impacts around 60 people, and those laid off were given varied levels of severance. Each employee was given 6 months of COBRA and was allowed to keep their laptops.

“As with so many other businesses globally, Optimizely has been impacted by COVID-19. Today, we have had to make a heartbreaking decision to reduce the size of our workforce,” Erin Flynn, chief people office, wrote in a statement to TechCrunch, adding that “today’s difficult decision sets up our business for continued success.”

The startup was founded in 2009 by Dan Siroker and Pete Koomen, on the idea that it helps to have customers experience different versions of the website, also known as A/B testing, to see what iteration sticks best. A year after founding, the startup went through Y Combinator in 2010 and in 2013 it signed a lease for a 56,000-square-foot office in San Francisco.

Optimizely last raised $50 million in Series D financing from Goldman Sachs, bringing its total venture capital secured to date at $200 million. Other investors include Index Ventures, Anddreessen Horowitz and GV.

In June, Optimizely said it handles more than 6 billion events a day. Customers include Visa, BBC, IBM, Wall Street Journal, Gap, StubHub, and Metromile.

Optimizely was not listed as applying for a PPP loan, a program created by the government to help businesses avoid laying off staff. The loans were met with controversy in Silicon Valley, as some thought venture-backed businesses should turn to investors, instead of the government, for extra capital.

Optimizely’s layoffs are somewhat surprising given recent earnings reports that show that enterprise SaaS companies have broadly benefited from the coronavirus pandemic. In an online work world, infrastructure and software services become more vital by the day. Box, for example, helps people manage content in the cloud and it beat expectations on adjusted profit and revenue. So why is Optimizely struggling?

There are a ton of reasons for layoffs beyond what the market thinks about a business. Optimzely’s customers are a mix of heavy-hitters in enterprise, but also include businesses that have struggled during this pandemic, including StubHub and Metromile — both of which had layoffs.

While the pace of layoffs is slowing down, cuts themselves aren’t disappearing. As the stocks show us, it’s a volatile time and businesses are looking for ways to stay financially safe.

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After colleges sue, ICE backs down from student visa rule change

The Trump administration has backed down from plans to revoke visas of international students studying in the U.S., whose schools planned to take their classes exclusively online in the fall because of the coronavirus pandemic.

The reversal comes as over a dozen universities and colleges threatened legal action against the administration’s order. The multi-faceted effort also was led by attorneys general in 17 states, including D.C., led by Massachusetts Attorney General Maura Healey.

On Tuesday, Harvard and MIT had a remote hearing to share a case against ICE’s rule, which would have put the lives of millions of international students in jeopardy. Within minutes of the hearing, Homeland Security agreed to revoke its initial plans to only allow international students to stay in the country if they are taking in-person classes.

The new guidance, which is based on March 9 guidelines, will only benefit students who are currently enrolled. This leaves new students or individuals set to come to the United States in the fall in flux.

The rule, announced last Monday, was broadly met with fury from the academic community. Yale Law School’s Dean, Heather Gerken, posted a statement in opposition to the rule. One professor said that “I will teach outside in the snow if I have to,” if it means keeping students in the country.

Developing… more soon

Trump’s sudden reversal on student visas will be felt in Silicon Valley

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Mighty Health created a wellness app with older adults top of mind

Virtual classes might make it easier to work out anywhere, anytime, but not for anyone. Mainstream fitness tech often targets the young and fit, in advertisements and cardio-heavy exercises. It effectively excludes aging adults from participating.

This gap between mainstream fitness and elders is where Mighty Health, a Y Combinator graduate, comes in.

Mighty Health has created a nutrition and fitness wellness app that is tailored to older adults who might have achy hips or joint problems. Today, the San Francisco-based startup has announced it raised $2.8 million in funding by Y Combinator, NextView Ventures, RRE Ventures, Liquid2 Ventures, Soma Capital and more.

Founder and CEO James Li is the child of immigrants, a detail he says helped him lean into entrepreneurship. He had the idea for Mighty Health after his father was rushed to the hospital for emergency open-heart surgery.

“Growing up, we can often think of our parents as invincible — they look after you and take care of you, and you usually don’t worry too much about them,” Li said. His dad survived the surgery, and Li thought about the evolving health needs and limitations of folks over 50 years old. He teamed up with co-founder Dr. Bernard Chang, the youngest-ever ED doctor to receive a top-tier NIH grant and the vice chair of research at Columbia University Medical Center, to create Mighty Health.

Mighty Health’s product is focused on three things: live coaching; content focused on nutrition, preventative checkups and workouts; and celebrations that let family members tune into their loved ones’ achievements.

The app has inclusivity built into its functionality. Everyday, a user logs in and gets a set of three to five tasks to complete, distributed among nutrition, exercise and workouts. The workouts are pre-recorded videos with trainers that have focused on the over-50 population. Think indoor cardio sets focused on being kinder to joints or lower her impacts.

Image Credits: Mighty Health

One customer, Elizabeth, is a 56-year-old mother who joined Mighty Health after suffering a cardiac incident. The app got her to start walking 9,000 steps a day, lose weigh, lower cholesterol and, best of all, discover a love for a vegetable she had recently written off: brussels sprouts.

Mighty Health’s other core focus, beyond fitness, is nutrition. The app pairs users with a coach to help them create healthy habits around nutrition and lifestyle. The coaching is done through text message. Li says this was intentional because in the early days of Mighty Health, he saw that coaching in-app was difficult for users to navigate.

Image Credits: Mighty Health

“You have to meet them in the middle where they are,” Li said. The live coaching is also met with phone calls, although 90% of coach interactions are text-message based.

The nutrition program also accounts for a diverse user base. Mighty Health chose not to offer or push recipes upon members, unlike a lot of other applications, because all countries and cultures might not find generic recipes accessible.

“Instead, we focus on the ingredient level,” he said. “We send them ingredients that they can piece together however they like at home in the way that they cook their cultural meals.”

The company offers a free seven-day trail, followed by a membership fee of $20 per month. It’s also having discussions with a number of health insurers to offer Mighty Health as a benefit.

With the new capital, the startup hired a few engineers and a designer to build out product integrations with fitness trackers, plus add new content. For now, Li sees his father’s progress with pride.

“Though I’m sure he sometimes thinks I just went from nagging him directly to nagging him through my product, he’s been eating healthier and exercising nearly every day,” Li said. So far, his father has lost 25 pounds.